Energy Transition Will Cost Trillions, Challenges and Opportunities Ahead

Critical minerals were in focus at this year’s Prospectors & Developers Association of Canada (PDAC) convention, as governments continue to step up their efforts to turn away from fossil fuels to greener sources of energy.

Net-zero emissions ambitions are becoming a global imperative, with the energy transition expected to be incredibly materials-intensive, Jack Bedder of Project Blue told the audience at a PDAC presentation.

“Renewable technologies and things like electric vehicles are far more metals-intensive than the legacy systems that they seek to replace,” he said. “And in many parts of the world, we're talking about building this infrastructure almost from scratch.”

Batteries to power electric vehicles and for energy storage will be needed, with demand for many different types of raw materials expected to increase. But are all metals becoming critical? Not necessarily, according to one expert at PDAC.

"The types of potential solutions to the world's battery needs are vast and changing every day … but aside from lithium there are a lot of alternatives for everything else," Ken Hoffman of McKinsey said during his keynote presentation at the show.

Lithium and copper have been receiving most of the attention in the past year, but Bedder pointed out that the energy transition is not all about base metals and battery raw materials — it's also important to remember the more unusual suspects.

“There's no global semiconductor industry without gallium, germanium, indium, antimony and silicate,” he said. “The idea of decarbonizing steel, which is greatly helped by the use of microalloys, things like vanadium, molybdenum, niobium … it's certainly the case that new stable supply chains for these metals (and) minerals will need to be built if supply is to meet demand.”

Bedder said there are a few barriers that need to be overcome to avoid the energy transition derailing over the coming decades, including a lack of capital expenditure and investment.

“It's hard to put a number on the amount of investment required, but it's certainly in the trillions. We need some new solutions,” he said. “We need a broadening of the investment base. It's going to take lots of different actors — not just miners, but providers, OEMs, private equity, streaming, governments and everyone else — to get the levels of investment we need.”

According to McKinsey, the amount of capital expenditure needed is about US$3.3 trillion in until 2030. Bedder said other challenges for the transition are the time it takes to develop new capacity, technical considerations and the geopolitical climate.

“But the opportunity on the other side is unbelievable,” McKinsey's Hoffman said. “People come to us all the time and ask, 'Where do I make money in the value chain?' It's very simple. It's been this way for the last decade. You want to make money, come to the mining industry. This is where everything's going to happen.”

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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.